New Zealand: Annual inflation won’t fall as low as previously thought – Westpac

Consumer prices rose 0.8% in the March quarter, much stronger than expected. While annual inflation rose to 2.5%, economists at Westpac expect it to drop back below 2% next quarter.

Key quotes

“Consumer prices rose by 0.8% in the March quarter, twice the increase that we and the market expected. The annual inflation rate rose to 2.5%, the highest since 2011. A forecast ‘miss’ of this size is rare, but it’s unclear how much of this will be sustained.”

“We expect annual inflation to drop back below 2% in the June quarter, largely due to a sharp fall in fuel prices as world oil prices have plunged.” 

“Today’s result means that annual inflation won’t fall as low as we previously thought for this year. However, it is unlikely to present a hurdle to further easing by the Reserve Bank, in the form of an expansion of its large-scale bond purchases.”